Ms Isolde Goggin:

Quite a few topics for discussion and some very interesting points were raised. I will begin with the points raised by Deputy Pringle. The 2006 Act amended the 2002 Competition Act. He is correct that it has a limiting clause. That is a difference between competition law and unfair trading practices law. We will always start with the consumer and that is where the object or effect clause comes in. When examining practices that are forbidden by our legislation we always start with the question of what will be the effect on the consumer. Practices with the object or effect of preventing, restricting or distorting competition are those that harm consumers. Practices that affect relationships within the supply chain above that are not really the target of competition law. In a sense that is why the issue about codes of practice and other ways of treating it has arisen so widely in Europe. Competition authorities in general believe that their aim is to see what happens in markets and that markets operate to allow consumers to exercise choice but within the limits of regulation.

That is a crucial point. It is about exercising choice not on the basis of wrong or fraudulent information, mislabelling or anything like that, but making a decision based on accurate and comprehensive information. The Deputy is absolutely correct in pointing out that certain of the practices the committee is concerned about may not be illegal under the 2006 Act.

Deputy Pringle referred to my observation that the code of practice might not solve all the problems that exist and asked for examples of what has happened in other jurisdictions. Deputy Pat Deering raised the question of voluntary versus statutory codes. To give a few examples, codes of practice are in place in the United Kingdom, Lithuania, Spain, Romania, Portugal and Slovakia. In the case of the latter, the code is set down in legislation. In the example of our nearest neighbour a grocery code adjudicator was finally appointed in June. The experience in that jurisdiction was that a voluntary code did not work very well. It was reviewed several times and eventually made statutory. There was a long debate about whether a code of practice adjudicator should be able to impose fines; in the end the legislation was amended to allow for that. As I said, the adjudicator has just been appointed and is in the midst of consulting on practices, procedures and so on. It is difficult to comment at this stage on the effectiveness or otherwise of that office.

There are different models throughout Europe. In Lithuania, for instance, the Association of Lithuanian Trade Enterprises has voluntarily accepted a code of good business practices. In Hungary, companies with significant market powers are required to draft a code of ethics in the domain of fair commercial practices which must be submitted to the national consumer agency for vetting. The Spanish competition authority has issued a report on imbalances in the food supply chain and an initiative is ongoing, similar to ours, to establish a code of practice there.

It is very difficult to give a definitive judgment on the effectiveness of the various schemes. The European Commission is currently examining issues in the supply chain and issues of imbalance between suppliers and retailers. The Directorate General for the Internal Market and Services has been working for several years on the matter of business-to-business practices. In 2010 it set up a high-level forum to examine strategies for a better functioning food supply chain, with the aim of promoting the competitiveness of the European food industry. The business-to-business platform was part of that, with an expert group on the competitiveness of the agrifood industry and an expert group looking at food prices. The Commission is working on an impact assessment of the different options to assess what it calls unfair trading practices. One of the key issues in that regard is whether codes should be voluntary or statutory and whether penalties and so on should apply. The Commission published a Green Paper earlier in the year and issued a consultation to help gather information on the matter.

At the same time the Directorate General for Competition, the one with which we are most closely associated in Brussels, is of the view that unfair business-to-business practices and unfair trading practices are one issue and competition law is another. It would be aware of some of the investigations that have been done. For example, the competition commission in the UK did a major investigation into supermarkets and retailing. That commission made a general finding that most of the savings the supermarkets achieved were being passed on to consumers, but it also identified what it described as an adverse impact on competition in terms of the ability of suppliers to innovate. Suppliers, the commission found, would get to a certain stage before the pressure became such that they could no longer re-invest in their own products and so on.

DG Competition has commissioned a study on the retail sector which will consider such issues as the concentration of market share among a small number of players. That is the case in Ireland but even more so in many other European countries. In some of the Baltic states, for instance, two players have 80% of the market. The study will also examine the effect of own brand or private label products, entry barriers, whether the bargaining power of retailers could have a negative effect on the ability of suppliers, particularly SMEs, to invest and innovate, and whether unfair commercial practices might eventually lead to unviable businesses because of the pressure on investment and innovation. It will also consider, in cases where there are differences in the legal framework between member states - this being the Commission, there is always a concern about such differences and always a slight harmonisation agenda going on - whether that could lead to legal uncertainty for suppliers, particularly exporters. This is very relevant to Ireland. To sum up, there are various examples of codes of practice in jurisdictions across Europe. By the time the Commission has done its work we will be in a better position to say exactly what works and does not work.

The Deputy also asked about compliance costs and how they might impact on businesses. The larger retailers and larger suppliers, which include multinationals and major brand owners, have the large legal departments, back offices and resources necessary to invest in compliance, as I am sure they do. One of the standard aspects of codes of practice generally is that they provide for a written contract or terms of business agreement, as it is was referred to in the draft code devised by John Travers in 2011. The idea is that everything would be set down therein and variations would only be permitted where provision for such is included in the agreement. That is important in providing a degree of certainty to suppliers and retailers. One of the concerns about compliance is that we could have a situation where small suppliers would be summoned into the office of a retailer, given a 300-page agreement and shown where to sign. Most small suppliers will not have the legal capability and back-up to pore over a document of that complexity to identify potential issues. The same scenario could equally arise with smaller retailers and large multinational suppliers. It is a two-sided thing. The obligations might be on one party but where there is a written contract or terms of business agreement it must be scrutinised by both parties.

Deputy Pringle also asked whether it would be anti-competitive to set a price for a product. The quick answer is that it depends who is setting the price. For example, the whole idea of a co-operative is that it would set the price that is paid to the farmer for his or her product. In fact, historically, the co-operative movement evolved in order to solve this very problem of small dispersed producers and the lack of bargaining powers they had in the food supply chain. The revised EU regulation on the organisation of agricultural markets makes provision for producer organisations to get together, but I would not have thought there was scope, outside of that, to set the price of milk forever. Such decisions should be part of the normal bargaining chain and there should be fluctuations in terms of supply and demand.

Deputy Tom Barry asked whether milk is a loss leader for retailers. The figures would not indicate that to be the case. Specifically, the difference between the input price of 26 cent per litre and the sale price of €1.49 for 2 litres does not signify that milk is a loss leader. It is, however, most certainly a known value item. People know how much it costs before they go into the shop to purchase it.